According to estimates of the number of sows that can be grown, the supply of pigs around April began to be lower than the same period last year, and the decline gradually widened. It is expected that as the impact of weight loss gradually weakens, the supply-side gap will gradually become apparent.
The Zhitong Finance App learned that Guojin Securities released a research report saying that according to estimates of how many sows are kept, around April, pig supply began to be lower than the same period last year, and the decline gradually expanded. It is expected that as the impact of the drop in weight gradually weakens and the supply-side gap is gradually reflected, pig prices are expected to continue to rise and provide good profits in the second half of the year. Pig production capacity has been lost for 15 months, and pig production capacity has been low since 2021. The pig cycle is expected to reverse in the second half of the year. As the cycle reversal period approaches, it is recommended to actively lay out investment opportunities in the pig sector, and it is recommended to select high-quality enterprises with excellent cost-side control and continuous expansion.
Recommended attention: Muyuan Co., Ltd. (002714.SZ), Wen's Co., Ltd. (300498.SZ), Huatong Co., Ltd. (002840.SZ), Tang Renshen (002567.SZ), Superstar Agriculture and Animal Husbandry (603477.SH), etc.
The main views of Guojin Securities are as follows:
The underlying logic of secondary fattening behavior is profit, and profit expectations are the driving factor for secondary fattening
Breeding risks in the industry increased after the normalization of non-plague. Secondary fattening is a less risky and fast-paced speculative act for small and medium-sized farmers to use in this context. It mainly means that farmers buy standard pigs to raise when pig prices are low, and then sell them when pig prices are good. The profit of secondary fattening consists of two parts: price difference and weight gain profit. Feed costs, price expectations, standard fertilizer price differences, seasonal factors, etc. all influence the strength or weakness of secondary fattening, while the strength or weakness of secondary fattening also affects short-term price trends. Judging from the price guidelines given in the current futures forward contract, the market has good expectations for pig prices in the future, leaving plenty of profit for entering the secondary fattening market. It is expected that secondary fattening will gradually increase in the near future.
The tracking index for secondary fattening is relatively lagging behind, focusing on the published weight
Guojin Securities believes that the industry has limited indicators that can effectively track the volume of secondary fattening. It is usually possible to determine the intensity of secondary fattening that has occurred through equal weight of pigs, because the most intuitive sign after secondary fattening occurs is the increase in the weight of pigs released. Trends in slaughter volume and feed production for fattening pigs can also be tested retrospectively. If there is a large deviation in the direction of the two data, it can be proved that the intensity of secondary fattening is high, but there is a certain lag in these data, which only indicates the strength or weakness that has already occurred during secondary fattening, and does not reflect the expected situation. Current pig prices and future price expectations are indicators for effectively monitoring the strength and weakness of secondary fattening sentiment. Furthermore, the proportion of pigs listed by the three parties that go to secondary fattening can also monitor the strength or weakness of secondary fattening to a certain extent.
Secondary fattening led to a short-term shift in supply. I am optimistic that pig prices will rise in the second half of the year
Judging from historical average pig price and average published weight data, the direction of change in average pig price for most of the time is consistent with the direction of change in average pig price. That is, supply decreases for a short period of time during storage, and pig prices should rise. The overall inventory of the industry declined in the fourth quarter of last year due to the impact of the epidemic in the north, and there was a decline in the number of large fat pigs in the industry. Until now, fat pigs still have a price advantage over standard pigs. Combined with the continuous increase in the average weight of the industry since the beginning of the year, the pig price center has continued to rise since the beginning of the year.
Recently, the average weight of pigs released has declined slightly, but the price of pigs is still quite strong during the removal process. Currently, the average weight of pigs released has dropped to 125.08 kg/head, which is 3.06 kg/head higher than the same period last year; the average weight of pigs after slaughter is 91.59 kg/head, which is lower than the same period last year. Although the introduction of secondary fattening in the early stages and the drop in pig prices in the North Group may have some pressure on the short-term rise in pig prices, factors such as the futures side guidelines still have good profits in the second half of the year, there is still plenty of room for increase in the average weight of pigs released, and differences in standard fertilizer prices driving farmers to raise pigs may increase their enthusiasm for secondary fattening. Currently, pig prices are at a critical point of increase. As the pressure to leave storage gradually decreases and enthusiasm for secondary fattening gradually increases, pig prices are expected to usher in an upward trend.
Risk warning: pig prices fall short of expectations, risk of animal diseases, risk of fluctuations in raw material prices.